Weekly Update 4/27/2018 – Stocks Seesaw With Benchmark Rate Hitting 3%

US: S&P 500 Index -0%, Dow -0.6%, Nasdaq -0.4%
Europe: STOXX Europe 600 +0.7%, German DAX +0.3%, France CAC 40 +1.3%, U.K. FTSE 100 +0.7%
Asia: Japan Nikkei +1.38%, China Shanghai Composite +.4%, Korea KOSPI +0.7%
Rates/Commodities: 10-Year Treasury yield +0 basis points to 2.96%, WTI crude oil -0.4%, COMEX gold -0.9%

Major indexes finished little changed this week as traders weighed the implications of rising interest rates against a deluge of economic data and corporate earnings reports. Though rising rates aren’t necessarily negative for stocks, the benchmark 10-year Treasury note’s breaching of the psychologically important 3% level for the first time since 2014 helped to push equities down more than 1% on Tuesday; a hole that proved difficult to climb out of despite a series of upbeat Purchasing Managers’ Index and housing market data. Corporate earnings provided pockets of strength throughout the week, and the big picture remains bright, but with the S&P 500 Index tracking to a blended growth rate of nearly 23% year over year, some questioned whether we may be seeing a peak in corporate earnings. “Our outlook for U.S. corporate profits remains very positive and supports our expectation for solid stock market gains in 2018, despite some concerns that this may be as good as it gets” noted LPL Chief Investment Strategist John Lynch.

Meanwhile, stocks in both Europe and Asia fared better despite softer-than-expected first quarter gross domestic product and inflation data out of both regions; though the European Central Bank and Bank of Japan buoyed sentiment after leaving interest rates and asset purchase programs unchanged following their respective policy meetings.

The week ahead will be busy for investors with a swath of top-tier economic data due out amid quarterly earnings reports from 125 S&P 500 firms including Apple, McDonald’s, and Ford. As is usually the case in the first week of the month, Friday’s nonfarm payrolls report highlights the economic docket; though Monday’s release of personal consumption expenditure data—the Federal Reserve’s preferred measure of inflation—will also be closely monitored, as well as pending home sales and auto sales. Overseas data to watch include Eurozone preliminary first quarter gross domestic product on Tuesday, followed by producer and consumer inflation on Wednesday. Meanwhile, manufacturing and nonmanufacturing data out of China and Japan highlight the week in Asia.

 

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